Supply chains 'returning to just-in-time as congestion eases'

1 February 2023

Supply chains are showing signs of a return to just-in-time strategies as port congestion eases, according to experts.

Disruption of the past two years pushed procurement teams to adopt just-in-case buying practices, but this is reversing and overstocking is becoming an issue.

Speaking at CIPS Procurement Futures, John Glen, CIPS chief economist, said: “Port congestion is now back to pre-pandemic levels so we’re starting to see greater supply chain fluidity. But we’ve also got an issue now in terms of the stocks.

“Essentially now what we're going from in supply chains is back to just-in-time from just-in-case. We’ve seen significant overstocking in the UK, Europe and North America – our distribution centres are full. 

“In the worst case, we’re seeing stocks being held at the ports and organisations are essentially using ports as warehouses and paying significant retention fees in order to do that. We’re going to see those stocks washed through the system in quarter one, quarter two, and then our supply chains will become fluid again.”

Glen said it was unclear how recent disruption would impact risk appetites.

“China will open up so we’ll get that manufacturing capability back into supply chains. How people manage risk in terms of their attitude of what’s happened over the past two or three years and going back to longer supply chains will be an interesting thing to see.” 

Glen anticipates labour shortages will increasingly become a challenge for supply chains in 2023.

“We'll move away from logistics confusion and chaos, towards labour supply. It will be labour supply which will cause issues in managing our supply chains, rather than the confusion that we've seen over the last few years due to the pandemic.”

Sonali Punhani, chief economist at Credit Suisse, said the UK was expected to enter into a recession that is expected to last until the third quarter of 2023, while inflation is expected to remain at 7.4%. 

Punhani said: “Given the historical context, [this will] actually be quite a shallow recession. So that's sort of the good news, that it's going to be not as big or as disruptive as the recessions that we've seen in the 1990s or 2008 or during the pandemic.”

She said a fall in energy costs of around 50% and a drop in raw material costs were easing inflationary and recessionary pressures. 

Punhani told SM that easing bottlenecks had reduced the pressure on procurement leaders to source different suppliers. But labour shortages would become one of the biggest challenges facing supply chains.

She said: “The issue has now moved away from talking too much about supply, to talking about labour and how to reclaim or source the labour that you need in order to keep running your operations.”

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